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When Return on Invetsment=Return on Life
from LAND Fall 2023
When Return on Investment=Return on Life
Re-Imagining 1031 Exchanges
STORY BY PETRA CAPITAL PROPERTIES
Petra Capital Properties is a national real estate investment firm specializing in diversified 1031/DST exchange solutions. We are passionate about helping our investors discover the potential of income producing real estate without the burden of day-to-day property management. All 1031/DST transactions carry risks and are not suitable for every investor.
As 77 million Baby Boomers brace for retirement, the road to financial security is paved with uncertainty. For most active landlords and property owners, the question looms large of how to reposition highly-appreciated real estate into sustainable streams of passive monthly income. Most investment real estate owners have worked a lifetime for return on investment. However, at this stage of life, the goal is to transform self-managed property into versatile lifestyle income that can be used for “living or giving.” We call this “Return on Life.”
According to the USDA Farms and Land Summary Report dated February 2022, there are more than 2,000 private farms and ranches in the U.S. representing over 1 billion acres and an estimated value of nearly $3 trillion. In light of changing business models and aging demographics, we believe that property owners are focused on profitable exit strategies. In making a hold versus sell decision, one fact remains the same. You’ve worked a lifetime to accumulate wealth, now the goal is to keep it. Simply stated, the objective of most investors is to preserve capital and protect cash flow.
Under IRS 1031 exchange rules, investment property sellers can defer capital gain taxes provided they reinvest proceeds into another investment property or properties. For most investors, a 1031 exchange starts with tax deferral. After all, taxes represent a permanent loss of capital as well as reduced earning power. However, as financial history demonstrates, we believe it is far more important to focus on investment fundamentals than tax advantages.
All real estate is not created equal. Investors should remember that a 1031 exchange is an investment strategy first— and a tax strategy second.
In the words of Yogi Berra… ‘If you don’t know where you’re going, you’ll get there every time.’
One of the fastest growing segments of the broader 1031 exchange market is the alternative Delaware Statutory Trust or “DST” for short (WealthManagement.com, “The DST Industry’s Growth is Fueled by 1031
Investors”, March 22, 2021.). The DST is a real estate trust that allows individual property investors to acquire beneficial ownership in one or more high-quality, income-producing properties, with professional third-party management. Much like “Legos,” individual DST property interests can be combined to create highly diversified and personalized income and growth portfolios that match each investor’s specific risk tolerance and investment objectives.
DSTs can be offered as either allcash investments, or partially leveraged investments with no personal recourse debt. Existing and available properties represent most major asset classes and diverse investment strategies, including: Class “A” multifamily residential communities, industrial properties, diversified healthcare assets, self-storage facilities, and demand driven essential properties backed by long term leases, credit-worthy tenants, and proven business formats. Depending on investment amount and personal preference, Petra can allocate to each of these asset classes for customized portfolio construction and optimized risk management.
While there is always risk to real estate investing, DSTs are offered as securitized real estate that must pass through multiple levels of due diligence and underwriting before being offered to qualified investors. If you are interested in learning how to transform your hard-earned wealth into a diversified portfolio of passive income DST properties, please give us a call.
Investment results and distributions are not guaranteed. 1031/DST transactions are speculative investments and are suitable only for investors with high risk tolerance that understand the risks, including: loss of entire investment, illiquidity, lack of marketability, long-term investment horizons, risks associated with real estate investment, and general market risks.
This information does not constitute an offering of, nor does it constitute the solicitation of an offer to buy, any securities. This material is not intended to provide any tax, legal, or investment advice. Securities offered through Saxony Securities, Inc., Member FINRA/SIPC.
Brad Watt
719.649.7770 | BradWatt@PetraCapitalProperties.com
PETRACAPITALPROPERTIES.COM
